Starting an MSP Business

Starting an MSP Business

Starting a managed service provider business is hard work, and it requires careful planning to be carried out successfully. It can be tempting to dive right in and start offering technical services -- after all, that’s what you know best if you have worked in IT before -- but it’s important to ensure that you start your MSP business properly by defining your offerings effectively, establish an appropriate pricing strategy, set up the right workspace and start off on the right foot with your first clients.

Keep reading for tips on starting a managed service provider business. We’ll cover everything from how to formally set up the business, through the onboarding process for your first clients. At the end of the guide, you will find the quiz about starting an MSP business with questions based on the content of this guide. Take it and see if you are ready to start your own managed services company.

Before You Start Your MSP

Before you can start providing managed services, you need to establish your business. Common steps in the process include:

Register a domain name and set up a website for your business.

Create (or commission) a logo.

Obtain a phone number.

Register the business as an LLC or another type of corporate entity.

Find an accountant, an attorney and any other business professionals you may need to help run the business.

Struggling to win new clients? Use this set of white-label marketing materials to close more Backup-as-a-Service deals.

Develop Your MSP Offering

Another basic step in starting an MSP business is to define which specific technical services you will offer, and how you will bundle them together. Although you may be able to perform a range of technical services, it’s important to determine which ones will bring you the most business at the most profitable rates. One factor to consider in this regard is which MSP services are in greatest demand in your area. If the local market for managed network services is already saturated, you may want to avoid including those as part of your business and, instead, focus on other services (such as managed backup or managed security) that are in greater demand.

You’ll also want to think about which services you can offer most effectively and cost-efficiently.

Which technical areas do you know best?

For which types of services will it be easiest for you to find qualified employees?

Will offering some services require you to purchase specialized hardware or software tools?

In most cases, you’ll decide to offer more than one service. So you need to determine how to combine your different services into a single package, or bundle. As we explain in our guide to MSP packages, bundling makes service offerings easy for customers to understand and consume, while also simplifying things for the MSP.

Determine Your MSP Pricing Strategy

There are many different pricing models and strategies that MSPs can follow, each with different advantages and drawbacks.

At a high level, MSP pricing strategies can fall into one of two categories.

The first is “All You Can Eat” pricing. Under this model, you charge a certain price to deliver a service for a certain amount of time (such as a month or a year), and the customer can consume as much of that service as they choose during that time. All You Can Eat prices are typically set based either on the number of devices you will be supporting or the number of users.

The second overarching pricing strategy is break-fix. With this approach, you define the cost of certain services, and customers pay only when they use a service, rather than paying a fixed monthly rate.

You can, of course, use a combination of All You Can Eat and break-fix pricing. In fact, that is what the majority of MSPs do.

For more tips on developing an effective pricing strategy, refer to the following guide:

Choose Your Software

There are multiple tools available in each category. The specific solutions you decide to use are up to you, but you’ll want to spend some time as you start your MSP on evaluating different options and weighing their costs and benefits. The point here is that software selection should be carefully planned; don’t just use the first tool you find or the one you currently know best, because it may not prove to be the most cost-effective or easiest to use in the long run.

Prepare Your Workspace

Once you have secured office space, you’ll need to devote time to set up your hardware and phone system. You may also need to put in place the cloud-based infrastructure that you’ll be using to support your business.

Find Your First Clients

Once you have completed all of the hard preparation work to start your MSP business, you’re finally ready to find your first clients. Of course, finding clients can be a challenge, especially if your background is in technical services, rather than marketing or sales.

Fortunately, finding MSP clients is not as hard as you might think. There are a variety of strategies you can employ:

Ask for referrals (from friends, business partners, and other customers, once you establish a customer base).

Establish an effective Web presence both to help clients find you and to instill confidence in the legitimacy of your business. A Web presence includes not just a website but also appearing in places like Google Reviews.

Partner with existing companies. Remember, not all other MSPs are your enemies; some might be willing to partner with you and send customers your way if the customers are not a good fit for their own business (because, for example, the customers need services that your partner doesn’t offer).

Be personable and professional. Marketing is an art, and it takes time to learn, but being personable and professional is one of the basics. Introduce yourself to decision-makers at prospective client companies and let them know which services you offer while avoiding being overly pushy.

Use discounts sparingly. It can be tempting to discount your services heavily when you are launching an MSP, in order to attract new customers. This is not usually a good idea, however, because lower prices decrease the perceived value of your services. They also eat into your profit margins.

For more tips on landing your first customers, see our article on the topic:

Onboard Clients Successfully

Finding clients is only half the battle. You also need to ensure that the onboarding process goes smoothly. When a client relationship is new, small missteps can lead customers to reconsider their decision to work with you. That’s why you should take extra care in ensuring that you integrate all of your new clients’ systems quickly and efficiently, train the customer’s employees effectively in working with you and your systems, and schedule routine check-ins to address any issues that arise during the onboarding process.

Transition from a Break-Fix Shop to an MSP Business

The transition from a break-fix shop to an MSP requires strategic planning, a maturity of operations and services, and a thought-through offering. The transition requires some basic steps you need to go through to get from break-fix to a full-on managed IT.

Step 1 - Learn Your Market

Know your strengths. Evaluate your past experience and find the distinctive skill set that will allow you to stand out from the competition. Focus on these strengths while building your offer.

Check for dominant business verticals. You may be surrounded by schools and universities, or you may have worked in one of the dominant verticals so that you know the industry-specific pain-points and have a couple of valuable contacts in your notebook. Check out our article with 5 tips for choosing your vertical.

Choose the right tools. You need to invest in RMM and PSA, automate your routine processes, and review your security stack.

Step 2 – Making the Proposition

When preparing your proposition, remember – your clients are not as tech-savvy as you are. Make sure that your services form a quality package and you know how to tell your customers exactly how helpful these services are to business processes and operational efficiency.

Step 3 - Push Your Break-Fix Clients Towards MSP

You won’t transfer all your break-fix clients to the new business model, but there is a chance that some of them can be transferred to the managed IT model. Here are several approaches that you can try:

Offer them a discount for the transition – one month free or 10% of the first annual bill.

Discuss the value of the managed IT model for their business, including streamlined processes, better IT budgeting, safe and thought-through infrastructure.

Stress the flexibility of the pay-as-you-go model.

Make sure that your break-fix clients understand that MSP clients now have priority in your workload.

Conclusion

Starting a managed service provider business requires a lot of careful work, from setting a pricing strategy to marketing your business, and beyond. But the difficult planning process is worth it because it will help you avoid issues in the long run by ensuring that your MSP business is set up for success from the start.

Guide to Starting a Managed Service Provider Business

We’ll cover everything from setting up the business to onboarding your first client:

Essential steps of establishing business

Building the software stack

Сreating an onboarding structure, and more

Test Your Knowledge on How to Start an MSP Business

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Quiz: Starting a Managed Service Provider Business

1 / 14

One of these pages is critical to have on your MSP website; the rest are optional. What can’t you run the MSP website without?

Customer success stories

“Contact us” page

Organizational structure

“Partners” page

No. It's the Contact Us section that is required for any MSP website.

2 / 14

What is RMM?

Reliable monitoring and maintenance

Remote monitoring and management

Revision of moderation and machines

Replication of mainframes and mailboxes

Not exactly. RMM stands for Remote Monitoring and Management.

3 / 14

What is a bundle in terms of the MSP business?

Set of actions to perform against cybercriminals

Pack of materials you send via email

The range of services you provide

The number of bills you cover annually

Incorrect. In terms of MSP business, bundling means combining several services into a “bundle” that you sell at a single, collective price.

4 / 14

How do you choose the services to offer?

The services that will bring you the most business at the most profitable rates

The services everyone else provides in your area

The rare managed services that no one around is offering

The services you don’t know anything about but want to find out more

Not really. It's the services that will bring you the most business at the most profitable rates.

5 / 14

Which of the following services is NOT often provided by MSPs?

Backup as a service

Disaster recovery as a service

Network security

Mobile device management

No, it's Disaster Recovery as a Service due to its complexity.

6 / 14

What are the main MSP pricing strategies?

“All you can eat” and experience curve

Experience curve and behavioral pricing

Break-fix and cost-plus

“All you can eat” and à la carte

Not really. The right answer is “All you can eat” and à la carte (also known as a break-fix model).

7 / 14

What does “all you can eat” pricing model mean?

An approach where you try to charge your customer as much as possible

A slang term for a pricing model for serving café, restaurant and hotel customers

Flat monthly fee-based pricing model that usually covers all remote and on-site support

Not exactly. It's a flat monthly fee-based pricing model that usually covers all remote and on-site support.

8 / 14

Which of the following statements about MSP pricing is TRUE?

If your client is HIPAA-compliant, this may require more specialized knowledge and care, so you need to charge more

Being the second-lowest price in the competition has no advantages

The simplest way to find out approximately how much you should charge per client is to evaluate your desired profit margin and divide it by the number of customers you serve

All the above statements can be true

No. All the above statements can be true.

9 / 14

Which of the following is the simplest way to get an MSP client?

Paid advertising

Cold calling

Referrals

Taking over bigger MSPs’ small clients

Almost every MSP will tell you that the biggest opportunity and lowest cost is your existing client base: referrals.

10 / 14

Which of the following market verticals is NOT very popular among MSPs?

Healthcare

Hospitality and restaurants

Agriculture

Education

Among these market verticals, agriculture is least frequently served by MSPs.

11 / 14

Which of the following is critical information that you should get from your new client?

Existing documentation (network map, equipment inventory, etc.)

Working hours for each office location

A list of line-of-business applications the client uses

Credentials for all IT systems and equipment

All of the above

All of the above is critical to get from your client at the beginning of the onboarding process.

12 / 14

What is SLA?

Second-level acquisition

Services. Licensing. Awareness

Social labor acknowledgment

Service level agreement

No, SLA stands for Service Level Agreement.

13 / 14

Why do you need an SLA?

To provide the customers with a catalog of your services

To make commitments with your customers, establish the terms and outline the service standards

To establish the mission, vision and strategy of your business

This is an appendix of the labor contract

Not exactly. SLA is about making commitments with your customers, establishing the terms and outlining the service standards.

14 / 14

Which of the following is NOT a step in the MSP client-onboarding process?

Creating a welcome document

Signing a service level agreement (SLA)

Upselling services after three months with a client

30-days check-in

No. Upselling services is not part of the client onboarding process.

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